Category Archives: Sabvest Capital (SBP)

Research reports on Sabvest Capital (code: SBP), an investment holding company.

Sabvest Capital – H1:25 Results – Apex Drives NAV Growth

Share Code: SBP – Market Cap: R3.6bn – Share Price discount to NAV: 31%

Sabvest Capital – Results Note – H1:25Download

H1:25 Results: Share buy-backs enhance growth

  • Sabvest’s Net Asset Value (NAV) grew +15% y/y versus H1:24 (or +3% versus FY 24), which, when combined with further accretive share buy-backs, saw NAV per share grow +5% to 13882cps (FY 24: 13213cps).
  • H1:25 share buybacks amounted to R69.3m (FY 24: R59.9m), or 735,000 SBP shares at a VWAP of c.9429cps (well below NAV and wonderfully accretive).
  • Importantly, valuation multiples were kept flat during the period, thus providing NAV growth of good quality.
  • Strong growth in Apex Partners and continued momentum in the recovery in ITL Holdings more than offset some disappointing performance in Amicus, Narrowtex (part of SA Bias), and Halewood SA.
  • The dividend was hiked +14% to 40cps (H1:24 – 35cps).

Thoughts: Momentum in H2:25E could rise

  • We expect continued growth from Apex (particularly as it unlocks value from DRA), and we expect ITL Holdings’ and Valemount’s respective performances to pick up momentum through the remaining year.
  • We also expect near-term recoveries in both Amicus (likely) & SA Bias’ Flowmax (likely) with a medium-term upside in Valemount (probable) & Halewood (possible).
  • Overall, though, we expect a good H2:25E performance from the Group’s businesses and their resulting investment values in Sabvest’s H2:25E NAV.

Valuation, 12m TP & Implied Return: Discounted

  • We estimate that the share is currently trading at a c.31% discount to its current 13704cps NAV and—after including a HoldCo discount against this NAV of 10% (unchanged)—we believe that the share’s fair value is around 12334cps (previously: 11798cps).
  • Rolling our post-discount fair value forward, we see the Group’s 12m TP as 14540cps (previously: 14017cps) with an implied return of +53% from these levels.
Sabvest Capital – Results Note – H1:25Download

Sabvest Capital – FY 24 Results – Wonderful Performance

Share Code: SBP – Market Cap: R3.5bn – Dividend Yield: 1.1%

Sabvest Capital_Results Note_FY 24Download

FY 24 Results: Excellent Results

  • Sabvest’s Net Asset Value (NAV) increased to R5bn, up 18% from R4,3bn and, amplified by share buy-backs at below-NAV prices, the Group’s Net Asset Value per share (NAV ps) increased by 21% to 13213cps (FY 23: 10936cps).
  • Major contributors to the NAV increase include strong performance from almost all investees, particularly ITL, which experienced a material fair value gain as the labelling group (finally) recovered strongly following the draw-out apparel sector post-COVID recovery.
  • Major realizations during the period include Metrofile, Rolfes, WeBuyCars, and (a partial exit of) Sunspray.
  • Share buybacks amounted to R59.9m (2023: R11.8 million) for 850 000 SBP shares (VWAP was c.7047cps).

Thoughts: Positive Momentum Going Forward

  • Growing investee profitability, central degearing annualizing and, possibly, further opportunistic share buy-backs are all promising for per share NAV growth in the coming period.
  • Furthermore, we expect good NAV growth to be particularly driven by positive performances in Apex Partners (DRA Global’s unlock) and the ITL Holdings Group (recovery shifting to growth).
  • It is worth note that the consistent execution of profitable exits at or above book value further supports our view of the sturdiness of the Group’s NAV.

Valuation, 12m TP & Implied Return: Discounted

  • We estimate that the share is currently trading at a c.31% discount to its current 13108cps NAV and—after including a HoldCo c.10% discount against this NAV of 10% (unchanged)—we believe that the share’s fair value is around 11798cps (previously: 10754cps).
  • Rolling our post-discount fair value forward, we see the Group’s 12m TP as 14017cps (previously: 12616cps) with an implied return of +55% from these levels.
Sabvest Capital – FY 24 Results NoteDownload

Sabvest Capital – H1:24 Results – Returning to Growth

Share Code: SBP – Market Cap: R2.9bn – Dividend Yield: 1.2%

Sabvest Capital – Results Note – H1:24Download

H1:24 Results: NAV Returns to Growth

  • Sabvest’s Net Asset Value (NAV) grew +3% y/y to 11786cps (H1:23 – 11465cps), management hiked the Group’s dividend to 35cps (H1:23 – 30cps), and bought back a further R51.7m shares during the period (average price of c.6893cps versus the NAV of 11786cps and the current share price of 7450cps).
  • Many of the Group’s underlying businesses recovered/grew nicely: Apex, Flexo and ITL all performed well while Corero’s share price more than doubled, and Transaction Capital unbundled We Buy Cars Holdings (JSE code: WBC).
  • On a balance, the Group’s portfolio outlook is good, its valuations are proving conservative (see ‘Thoughts’ below) and management is steadily degearing as cash is realized and/or flows centrally.

Thoughts: Exits Underscore Conservative Valuations

  • Sabvest has (1) agreed to exit Metrofile in two tranches at an above-market price (301cps), (2) received an initial R80.6m from its exit of Sunspray (at above-book at the time), & (3) concluded an exit from Rolfes that should be at a premium to its previous value in the Group’s NAV.
  • This is c.6% of assets being realized at above-book prices (proceeds should go into degearing) and it goes to evidence Sabvest’s conservative unlisted valuations.

Valuation, 12m TP & Implied Return: Discounted

  • The share is trading at a c.37% discount to NAV, which is well off from the JSE-listed peer group average discount particularly when compared based on Sabvest’s superior track record (i.e. the Line-of-Best-Fit below).
  • Using our updated NAV (with the latest market prices) we arrive at a defendable (post-discount) fair value for Sabvest’s shares of 10754cps (previously: 9817cps), which still includes a HoldCo c.10% discount against this NAV (unchanged from prior period).
  • Rolling our post-discount fair value forward, we see the Group’s 12m TP as 12616cps (previously: 11675cps) with an implied return of +69%.
Sabvest Capital – Results Note – H1:24Download

Sabvest Capital – FY 23 Results – NAVigating a Challenging Period

Share Code: SBP – Market Cap: R2.7bn – Dividend Yield: 1.3%

Sabvest Capital – Results Note – FY 23Download

FY 23 Results: Rare period of pressure

  • Sabvest saw its Net Asset Value (NAV) per share slip fractionally lower to 10936cps (FY 22: 11017cps) as headwinds of higher inflation, higher interest rates and higher raw materials costs coincided with logistics challenges across the businesses held in its portfolio.
  • Most of the Group’s businesses performed good-to-well, though ITL Group & Halewood continued to trade through difficult respective structural and cyclical headwinds.
  • Management expects to resume satisfactory growth in NAV per share in FY 24, & we tend to agree.

Thoughts: Today’s Underperformers = Tomorrow’s Upside

  • Over the last couple of years, ITL’s contribution to NAV has fallen from 20% to 10%, but the business (&, indeed, the entire global apparel sector) has restructured & could end up gaining from this period of disruption. Equity here is currently valued at zero but we suspect that this will not remain so & provides future upside optionality.
  • Likewise, Halewood’s current difficult trading period belies the value of the underlying that—in our opinion—management is valuing conservatively. As headwinds turn to tailwinds here, earnings should follow mix, & we see upside in this investment’s contribution to NAV too.
  • Finally, SA Bias is performing excellently & Apex, DNI, Valemount & Masimong all have healthy prospects.

Valuation, 12m TP & Implied Return: Wide discount to NAV

  • The share is currently trading at a c.37% discount to NAV.
  • Using our updated NAV (with the latest market prices) we arrive at a defendable (post-discount) fair value for Sabvest’s shares of 9817cps (previously: 10060cps), which still includes a HoldCo c.10% discount against this NAV.
  • Rolling our post-discount fair value forward, we see the Group’s 12m TP as 11675cps (previously: 11920cps) with an implied return of +69%.
  • See inside our report comparisons to some of the other JSE-listed HoldCo stocks.

Sabvest Capital: Breakdown of Group Net Asset Value (NAV)

Sabvest Capital – Results Note – FY 23Download

Sabvest Capital – H1:23 Results – Growth Despite Tougher Period

Share Code: SBP – Market Cap: R2.8bn – Dividend Yield: 1.3%

Sabvest Capital – Results Note – H1:23Download

H1:23 Results: Fully Invested

  • Sabvest grew its Net Asset Value (NAV) by +10.4% y/y to 11465cps (H1:23 10388cps) and maintained its interim dividend at 30cps (H1:22 – 30cps).
  • The Group is fully invested and, indeed, has several investment disposals in progress. With net debt at c.10% of gross assets, we expect realizations to be applied (somewhat) to degearing.
  • Management expects moderate growth in NAV per share for the full FY 23E period.
  • Note (below) how unlisted valuation multiples have remained flat over the period.

Sources: Sabvest, Iress, Profile Media, various company reports, & Blue Gem Research workings & assumptions; *Valuation performed by Masimong management predominantly based on Discounted Free Cash Flow methodology. **Average between subsidiaries’ multiples (4.5x and 6.0x).

Thoughts: More Nuanced Performances from Investees

  • While H1:23 was generally a tougher trading period for underlying businesses, particularly Apex, ARB and SA Bias all performed strongly and saw good growth in their earnings and, thus, resulting valuations.
  • Somewhat offsetting this, Halewood saw a cyclical adverse product mix and ITL continued to be buffeted by macro headwinds in the global apparel supply chain causing both to underperform. Both these businesses are good quality, and, in time, we expect these headwinds to abate, normal growth to continue and their respective contributions to Sabvest’s NAV to rise accordingly.

Valuation, 12m TP & Implied Return: 40% discount to NAV

  • Updating the Group’s NAV for the latest market prices we arrive at a defendable (post-discount) fair value for Sabvest’s shares of 10060cps (previously: 9227cps), which still includes a HoldCo c.13% discount against this NAV.
  • Rolling our post-discount fair value forward, we see the Group’s 12m TP as 11920cps (previously: 10906cps) with an implied return of +73%, excluding dividends.
  • Beyond the above numbers and implied returns, the fact is that the Group’s share price (6900cps) is currently at a large c.40% discount to what we estimate its current NAV is (11534cps). Given the Group’s track record, quality of NAV and prospects, we find this large discount strange.
Sabvest Capital – Results Note – H1:23Download

Sabvest Capital – FY 22 Results – Exciting Prospects

Share Code: SBP – Market Cap: R3.2bn – Dividend Yield: 1.1%

Sabvest Capital – FY 22 Results NoteDownload

FY 22 Results: Better than Expected

  • Sabvest Capital’s NAV grew 17.6% y/y to 11017cps beating our expectations, the Group’s HEPS was firm at 1591.2cps (FY 21: 1689.7cps) and management has materially lifted the dividend to 90cps (FY 21: 75cps).This was a busy period with a range of new investments from ARB Holdings, Halewood to Valemount Trading.
  • The Group’s investee companies executed various underlying investments from Apex buying into DRA Global to SA Bias’ Flowmax acquiring YG Prefab in the UK.

Thoughts: Exciting Portfolio Prospects

  • While ITL’s may be the only duller spot in Sabvest’s portfolio (longer-term, though, we are very optimistic about this group’s prospects), DNI-4PL is firing all cylinders, SA Bias is performing strongly, and Apex Partners is fast growing into a material investment for the Group.
  • ARB Holdings is benefitting from the boom in solar, Halewood and Valemount Trading both hold immense potential for profitable expansion from their positions in the RTD/beverage and pet industries respectively.

Valuation, 12m TP & Implied Return: Cheap & Growing

  • Updating the Group’s NAV for the latest market prices we arrive at a defendable (post-discount) fair value for Sabvest’s shares of 9227cps (previously: 8894cps), which still includes a HoldCo c.14.5% discount against this NAV.
  • Importantly, the underlying NAV appears to be conservatively valued and management’s track record for growth is well above average. These two factors combine favourably to form the Group’s investment appeal, particularly when offered at a discount (we estimate the share price currently offers a c.25% discount to NAV).
  • Rolling our post-discount fair value forward, we see the Group’s 12m TP as 10906cps (previously: 10511cps) with an implied return of +35%, excluding dividends.
Sabvest Capital – FY 22 Results NoteDownload

Sabvest Capital – H1:22 Results – Better than Expected

Share Code: SBP – Market Cap: R2.9bn – Dividend Yield: 1.0%

Sabvest Capital_- Results Note – H1:22Download

H1:22 Results: Better than expected

  • Sabvest’s Net Asset Value (NAV) grew +10.9% p/p and +26.1% y/y to 10388cps (FY 21: 9371cps) driven by strong performances almost across all its investments that beat our full-year estimates.
  • The Group concluded investments in ARB Holdings and Halewood International South Africa during the period.
  • Despite this investment activity, the Group received good dividend flows, remains relatively lowly geared and management has declared a +50% y/y growth in dividend to 30cps (H1:21 – 20cps).

Thoughts: H1:22 growth likely to continue in H2:22E

  • ARB Holdings and Halewood are currently being carried at cost. While we expect operational growth in ARB to carry this investment value upwards, Halewood’s investment price appears quite conservative, and we expect both operational and re-rating to lift this valuation going forward.
  • Likewise, DNI-4PL, Masimong & Apex are all growing quickly, ITL Holdings’ global group has recovered strongly and SA Bias’ Flowmax appears to be on the front foot for acquisitions.
  • Finally, coupled with Sabvest’s superb capital allocation, relatively lowly-geared centre and its ability to buy-back its own shares below NAV, and it is likely that the good growth rate in H1:22 carries comfortably into H2:22E (and beyond).

Valuation, 12m TP & Implied Return: Lots of value available

  • Updating the Group’s NAV for the latest market prices & taking out our present valued “HoldCo discount”, we arrive at a defendable (post-discount) fair value for Sabvest Capital shares of 8894cps (previously: 7487cps) or +22% higher than the current share price.
  • Rolling this fair value forward at our Cost of Equity, we see the Group’s 12m TP as 10511cps (previously: 8825cps) with an implied return of +44%.

Refer to our Initiation of Coverage for more background.

Sabvest Capital_- Results Note – H1:22Download

Sabvest Capital – FY 21 – Great Performance with More to Come

Share Code: SBP – Market Cap: R2.4bn – Dividend Yield: 0.6%

Sabvest Capital – Results Note – FY 21Download

FY 21 Results: Strong NAV growth, large hike in dividend

  • Sabvest’s FY 21 Net Asset Value (NAV) per share grew by +26% y/y to 9371cps (FY 20: 7444cps), adding to the Group’s fantastic track record as it has compounded NAV per share (excluding dividends) at +16.9% CAGR for a decade & a half!
  • Updating this NAV (keeping unlisted valuations flat), we see the current share as trading at a c.37% discount. This is despite JSE-listed HoldCo’s average discount-to-NAV being c.30%, and despite most of these other HoldCo’s having a worse track record than Sabvest. Using this peer-average discount, Sabvest shares should be trading closer to 7000cps.
  • Sabvest hiked its dividend to 75cps (FY 20: 25cps) as its balance sheet remains comfortably capitalized.

Thoughts: “Quality” growth in NAV, more likely to come…

  • As most of Sabvest’s investments are unlisted (c.86% of NAV), it is important to emphasise that the growth in NAV is not due to rising valuation multiples (all valuation multiples are flat from FY 20). The growth in NAV was driven by earnings growth &, therefore, we consider it “quality growth”.
  • As investee companies are trading at-or-better than 2019 pre-COVID levels, we expect continuing NAV growth in FY 22E.

Valuation, 12m TP & Implied Return: Lots of value available

  • Updating the Group’s NAV for the latest market prices & taking out our present valued “HoldCo discount”, we arrive at defendable (post-discount) fair value for Sabvest Capital shares of 7487cps (previously: 6826cps) or +19% higher than the current share price.
  • Rolling this fair value forward at our Cost of Equity, we see the Group’s 12m TP as 8825cps (previously: 8000cps) with an implied return of +40%.
  • All these measures exclude the potential upside from the ARB Holdings delisting, Apex’s Ascendis Medical deal & any Rand weakness going forward that will lift hard currency valuations.
  • Refer to our Initiation of Coverage for more background.
Sabvest Capital – Results Note – FY 21Download

Sabvest Capital – New Investments & Strong Trading Update

Share Code: SBP – Market Cap: R2.4bn – Dividend Yield: 0.6%

Sabvest Capital – Ad Hoc Note – 7 February 2022Download

New Investment: ARB Holdings Ltd

  • Masimong Electrical (49.9%-held by Sabvest & 50.1% by Masimong) has offered minority shareholders in ARB Holdings 800cps. Along with the Burke Family (62.9%-shareholding in ARB), the deal aims to take the electrical & lighting wholesaler private. The total consideration will be c.R697m, & Masimong and Sabvest have each committed R223.5m funding (Sabvest’s share is c.9.3% of its market cap & c.6.5% of published NAV).
  • Irrevocable undertakings to vote in favour of the deal have been received from 69.4% of eligible shareholders, thus, we believe that this deal’s successful outcome is quite likely.
  • Refer to our notes on ARB Holdings for detail on the Group.

New Investment: Apex Acquires Ascendis Medical

  • Sabvest’s 44.8%-held investment, Apex Partners, has acquired a stable of Ascendis Health medical devices businesses for R550m (less c.R200m catch-up capex & up to R25m excess rental). See the full announcement here.
  • Ascendis Medical’s FY 21 revenue was R983m but bottom-line expectations vary given Ascendis’ neglect of the businesses.

Trading Update: Growth in NAV Better than Expected

  • Sabvest expects its FY 21 Net Asset Value (NAV) to be more than +19%y/y (>8858cps) while also hiking its dividend >80%.

Valuation*, 12m TP* & Implied Return*: Awaiting FY 21 Results

  • We have left our fair value (6826cps*) & 12m TP (8000cps*) unchanged & will update these after the FY 21 results. Given the trading update, though, we expect to upgrade our views.
  • While we do not expect ARB Holdings to materially change Sabvest’s NAV in the short-term, in the long-term the Group is an excellent, cash-generative & well-positioned business that is likely to contribute positively to NAV growth. Likewise with Ascendis Medical’s optionality. Perhaps, more subtly, these new investments further entrench Sabvest as a unique listed entry-point into a portfolio of unlisted companies.
  • See H1:21 Results Note & our Initiation for more background.

* Under review until post-FY 21 results

Sabvest Capital – Ad Hoc Note – 7 February 2022Download

Sabvest Capital – H1:21 – Delivering Growth & Offering Value

Share Code: SBP – Market Cap: R2.1bn – Dividend Yield: 0.45%

Sabvest Capital – Results Note – H1:21Download

H1:21 Results: Businesses trading at-or-better than 2019 levels

  • Sabvest Capital’s Net Asset Value (NAV) per share grew by +24% y/y to 8240cps (H1:20 – 6624cps) to the end of 30 June 2021. We have updated this post-period and see NAV currently at closer to 8500cps (our estimate).
  • The Group doubled its interim dividend to 20cps (H1:21 – 10cps) as its balance sheet saw degearing and management has steadily continued buying back shares in the open market (which we consider value accretive at these levels).
  • Perhaps most importantly, management emphasises that at the date of publishing the results all the Group’s businesses are trading at-or-better than 2019 (and 2020) levels.

Thoughts: Upside to forward valuation, corporate actions

  • Multiples used to value the Group’s unlisted investments were flat or slightly lower than prior periods. This gives us comfort that NAV growth is earnings-based (i.e. good quality).
  • In Classic Foods (and, even Revix) case(s), it looks likely that valuations may be written upwards in the near-term. Added to this, the current trading of the underlying businesses implies higher forward valuations too, even if multiples remain flat.
  • Finally, management’s share buy-back & hints at a potential acquisition may drive further upside from here.

Valuation, 12m TP & Implied Return: Lots of value available

  • Updating the Group’s NAV for the latest market prices and taking out our fairly-valued “HoldCo discount” of 20% (previously: 19%), we arrive at defendable (post-discount) fair value for Sabvest Capital shares of 6826cps (previously: 6402cps) or +31% higher than the current share price. As noted, we see upside risk to this expression of fair value.
  • Rolling our fair value forward at our Cost of Equity, we see the Group’s 12m TP as 8000cps (previously: 7542cps) with an implied return of +54%.

Refer to our Initiation of Coverage for more background.

Sabvest Capital – Results Note – H1:21Download